Demand for outpatient, social care puts healthcare real estate on the rise

The global healthcare real estate market is on a strong growth trajectory, expected to expand from $1.34 trillion in 2023 to more than $2.27 trillion by 2030, according to data from business consultant Grand View Research. The sector’s rapid growth reflects a convergence of powerful forces: aging populations leading to growing healthcare spending, technological innovation and the shift toward more flexible outpatient models of care.

In the US, the world’s largest healthcare real estate market, the Census Bureau expects the elderly population to rise from 58 million in 2022 to 82 million by 2050, highlighting a need for more outpatient facilities in underserved areas.

“Within the US healthcare real estate market, the delivery of care continues to shift away from traditional hospital settings and into more efficient, community-based outpatient venues,” says Patrick Hammes, managing principal of healthcare real estate investment management firm Hammes Partners. “This ongoing shift reflects the industry’s growing focus on patient convenience, cost effectiveness and operational efficiency.”

Outpatient care gains popularity

Outpatient facilities offer easier access, shorter waits and a healthier environment, all while enabling health systems to expand their footprint, boost revenue and operate more efficiently.

Hammes adds: “Growth in the outpatient sector has also been fueled by technological advancements that enable a broader range of higher-acuity procedures to be safely performed outside the hospital, allowing patients to return home sooner while reducing overall healthcare costs.”

Brokerage CBRE expects the US medical outpatient building sector to remain resilient, forecasting triple-net asking rent growth of 1.4-1.8 percent over the next two years, and vacancy rates to fall below 9.5 percent, even amid a healthy pipeline of new developments.

Over the first half of this year, however, investment activity has reflected broader market caution. Transaction volumes fell 19 percent year-on-year to $3.5 billion, according to brokerage Cushman & Wakefield. The slowdown – driven by softening investor sentiment amid evolving healthcare regulations, proposed tariffs, the Fed’s cautious stance on rate cuts and limited prime assets – appears to have been temporary.

Gino Lollio, executive director of healthcare capital markets at Cushman & Wakefield, says momentum is returning. “There was a little bit of a pause, but we’ve since seen an increase in Q3 and overall market sentiment. There’s been more activity and greater liquidity in the financing and debt markets. It definitely feels like transaction volume in the second half will surpass the first half, particularly with several large portfolios rumored to close before year-end.”

Investor demand for the broader medical office segment in the US remains strong, Lollio adds. “There’s significant interest in well-located, well-leased assets backed by financially sound healthcare providers – including hospitals, health systems or even private practices.

“There’s also strong interest in value-add opportunities for deals that have strong fundamentals, whether there’s a mark-to-market rent on renewal or lease-up, or potentially some small ability to convert professional office space to medical office space at an arbitrage in rental rates and overcoming the increased cost to get there through tenant improvements and build-out, in order to capture higher returns.”

Ambulatory surgery centers are also drawing attention, and there is a flight to yield in areas like behavioral health, though investors continue to assess sponsorship quality and operator profiles, Lollio notes.

Shifting European focus

Like the US, Europe is seeing rising demand for healthcare and social infrastructure.

Tom Pridmore, co-founding partner at impact fund advisory firm Civitas Investment Management, says: “An aging population, coupled with the growth in social care expenditure and a lack of public investment, as well as a growing focus on community-based care solutions, is driving demand for high-quality, convenient and accessible community-based care and assisted living across Europe.”

In the UK, one of Europe’s most mature and institutionally active healthcare real estate markets, aging population and outdated medical infrastructure are creating opportunities for both large hospitals and smaller community facilities and medical office buildings. Government initiatives such as the NHS New Hospital Programme, aiming to rebuild 40 major acute facilities by 2030, and the ongoing consultation on “neighborhood health” centers are expected to catalyze public-private partnerships and attract investors.

Real estate developer Kajima Partnerships sees potential in community-based healthcare across the country, a model that aligns with the government’s aim to relieve pressure on emergency departments by offering local diagnostic and treatment services.

“These facilities, construction capex-wise, should be much cheaper: £20 million-£50 million ($26 million-$66 million; €23 million-€57 million) versus over £1 billion for a large acute hospital,” says Chris Gill, a managing director at the firm. One example is Velindre Cancer Centre in Wales, a £350 million specialist facility that reflects a focus on targeted, high-need areas that align with national healthcare priorities and offer a more agile and innovative delivery model.

While large hospitals remain critical, Kajima focuses on delivering essential healthcare facilities faster and more efficiently.

“The big acute hospitals take significant time to deliver through procurement, planning and construction, in some cases over 10 years,” Gill notes. “We are more selective and look for opportunities where we can make a real impact more quickly.”

Nick Short, fund manager, healthcare at Royal London Asset Management – a wholly-owned subsidiary of Royal London, the UK’s largest mutual life and pensions company – points out that elderly care in the UK is attracting significant capital from domestic and international investors.

“Private hospitals are also gaining traction amongst investors, with several funding opportunities emerging, whereas sectors such as primary and specialist care, despite some movement in the markets, are seeing comparatively limited investor interest due to issues like fragmenting operating markets and smaller lot sizes.”

Looking beyond the UK, most healthcare real estate investment across Europe remains concentrated in nursing homes, simply because there are far more of them than clinics or hospitals, says Paul Darribère, global head of healthcare and hospitality at BNP Paribas Real Estate Investment Management. Investment patterns also vary by country. For instance, the market for clinics and hospitals is very small in Germany, compared with France, UK or the Nordics.

Darribère highlights the importance of demographics and equipment ratios in spotting opportunities. “One of our priorities in recent quarters has been to grow our portfolio in Italy.

“Italy already has one of the most aged populations, and it’s growing fast. Yet its equipment ratio – the number of nursing home beds relative to the elderly population – remains low. Much of the existing stock is also old and not fully aligned with European standards, which creates clear investment opportunities.”

Investors are also adapting portfolios to evolving healthcare delivery. Xavier Cheval, head of healthcare at pan-European manager Praemia REIM, notes: “We are seeing additional capex for hospital refurbishments to accommodate more outpatient flows, expanding waiting rooms, changing rooms and other areas to speed up processes or allow a greater focus on technical procedures.

“On the care-home side, there’s growing demand for more individualized accommodation and for opening facilities to non-residents who access services during the day rather than staying full-time.”

The rise in chronic diseases, like dementia or depression, is also driving the need for specialty care across the continent, says Guy-Young Lamé, head of research and strategy at Praemia REIM. “With the outpatient trend growing in Europe – though already more advanced in the US and the UK – we’re also seeing increased demand for rehabilitation and long-term care centers.”

Regulation and operational risks

Despite strong long-term fundamentals, the healthcare real estate sector is facing headwinds from policy or regulatory uncertainty.

A recent example in the US is the Trump administration’s One Big Beautiful Bill Act, signed into law in July. The legislation includes about $910 billion in cuts to government healthcare spending over the next decade, mainly targeting Medicaid reimbursement rates, research funding and patient coverage.

Most of these reductions, however, are not expected to take effect until 2030-34, giving health systems time to plan and adapt – and some may even be rolled back before implementation, Hammes explains.

“The greatest risks are concentrated among financially vulnerable health systems and rural safety-net hospitals with higher Medicaid exposure. In contrast, healthcare systems with stronger balance sheets and diversified revenue streams are better positioned to weather these policy shifts,” says Hammes.

Beyond policy headwinds, operational challenges are also weighing on the sector. In the UK, Short notes: “Putting aside the impact of local authority funding shortfalls on the care sector, staffing remains the sector’s biggest challenge.”

He adds that Brexit and policies on visas and National Insurance have further strained workforce availability. “However, high-quality operators with well-designed facilities are better able to attract, retain and remunerate talent. As an investor, we partner exclusively with operators such as this.”

Healthcare real estate investors can manage risks by diversifying across geographies and healthcare subsectors, explains Lamé: “Diversification is a key objective. New investors are trying to understand every segment.”

Darribère echoes this approach, emphasizing the importance of local expertise. “We take a diversified approach, investing across clinics, hospitals and nursing homes, but the key for investors is local knowledge. Even within a shared demographic framework, regulations differ across countries, so having teams on the ground who understand both the rules and the operators is essential.”

Regulation, in fact, can be seen as a positive, Darribère says. “It helps protect the market from the risk of oversupply. We only include in our portfolio assets that are subject to specific healthcare regulations. In every country, opening a nursing home or clinic requires authorization from the healthcare authorities. This creates a barrier to entry that safeguards our investments.”

As healthcare demand rises and outpatient, specialty and community-based care expand, the global healthcare real estate market offers growing opportunities for investors that combine local expertise with strategic diversification.